Friday, September 10, 2010

I have been trying to estimate what they are likely to set as the price for the iPhone 4.

The simplest way of doing this, I felt, was to see prices of other similar Apple products worldwide with those in India and work out some sort of "Apple exchange rate"(I call it that because Apple products in India are priced much higher than what they would be if one directly converted using the exchange rate. I am not sure whether its custom duties or arrogance or both)

Unfortunately, I cannot use the iPhone 3GS as a reference because Apple doesn't mention an official price for it on their India website. I need something which has readily available India and international prices.

The iPod Touch, 4th generation, is a good fit in that respect.

So I went ahead, comparing prices:

iPod Touch

USD

HKD

SGD

GBP

INR

8 GB

229

1788

328

189

15400

32 GB

299

2288

428

249

19900

64 GB

399

3088

588

329

25900

Dividing the INR price by the corresponding foreign currency price and averaging it allows me to work out the "Apple exchange rate" versus the actual exchange rate. Here are the rounded figures:

Actual Rate

Apple Rate

USD-INR

46.5

66

GBP-INR

72

80

HKD-INR

6

8.5

SGD-INR

35

46

A glance tells me that Apple is kindest when it comes to Hong Kong, as far as pricing is concerned. The UK suffers the most.

Next step, work out the implied India iPhone 4 pricing using actual and Apple exchange rates. I have excluded the US since there is no non-contract iPhone 4 price available.

iPhone version

HKD

GBP

SGD

16 GB

4988

499

888

32 GB

5888

599

1048

INR -Actual Exchange Rates

INR - Apple Exchange Rates

HKD

GBP

SGD

HKD

GBP

SGD

Likely Price

29928

35928

31080

42398

39920

40848

41000

35328

43128

36680

50048

47920

48208

49000

So the iPhones in India may be priced at 41k and 49k respectively. Startling differences here! If I were to believe in this study, buying the iPhone from Hong Kong, or even Singapore, makes a lot of sense. Theres a site called http://www.shopyourworld.com/shop/ which claims to ship iPhones from the UK; they are better off trying to get it from HK / Singapore (provided they have the necessary contacts)! Its an unlocked version that you get there (unlike the US) so no fuss about that either. So grab hold of that friend whos going to HK on a weekend trip, and save 11000 rupees! Of course, getting it into India is the tricky part. What customs duty will be applicable? I am honestly not aware. But I do know it will be difficult to stomach the ignominy of shelling out 41k for an iPhone 4 in India, knowing that the same thing costs 30k in the HK (and less than 41k throughout most of the world)

Thursday, September 9, 2010

Keeping a promise made long back to myself, I shall try and post my views on economics, financial markets and the rest regularly. Please feel free to contribute, debate, challenge and criticize.

I am fairly puzzled by the recent rally in financial asset markets, Indian equities in particular. Given the current state of things, one can always work out the reasons backwards, but to have predicted that this would have happened was, as always, difficult. I used to laugh on seeing the views touted by the retail gurus on CNBC, but so far they have been right and I have been wrong. Therefore I am forced to accept that somewhere the linkages of cause and effect as imagined by me have been incorrect.

While I am quietly confident about the prospects of economic growth in India, I am not overtly bullish the way other market participants seem to be. We have a long way to go, in many aspects, before we can really claim the coveted tag of an economic superpower. And to my mind there are obstacles right now which make unbridled growth in India seem like a pipe dream.

First, there is inflation. One can refer to innumerable examples in economic history which show that inflationary growth is unsustainable. Despite inflation hitting lows in the developed economies (the reasons for which are totally different) and remaining reasonably stable in India's "peer group" i.e. other emerging countries, India continues to suffer from high inflation. A recent article by the Peterson Institute blames this on asset price inflation (land in particular) and I am inclined to agree with them. Flats in Powai are selling for 15000 rupees a square feet. I heard of a recent sale of a flat in Bandra for 11 crores at a rate of close to 65000 per square feet! Of course it is too chauvinistic to extrapolate from Mumbai anecdotes and generalize them for the whole of India, but it does put things in perspective. Indian equities enjoy a premium of as much as 40% over bottom up valuations, as per some equity analysts. But the market continues to clear because everyone wants a slice of the pie - every financial asset manager has some portion of his money in India. Apart from asset prices, another culprit has been food price inflation. Some people are willing to take a call that with the monsoons doing well, food price inflation is likely to subside. However, I am not as sanguine because the world's supply of food continues to teeter on the edge with respect to the demand. With disturbing weather patterns and increasing protectionism, things may not be as simple.

And the RBI is not able to help as much as it would like to. They view the problem of inflation in India as partly structural due to intrinsic capacity constraints. Additionally, a lot of the country's financing needs are met outside the regulated financial system. Variations in the benchmark policy rates doesn't help them because they are dependent on an inelastic, exorbitant system of financing through local moneylenders and the like.

Compounding the RBIs problems is the fact that we have witnessed the worst recession since the Great Depression and a reasonably sharp recovery in less than 2 years. The strong action taken by policymakers post the Great Recession of 2008 has stopped the pain temporarily at least, but also confused everyone as to where in the economic cycle we stand currently. Thus, the RBI is forced to lag the monetary tightening cycle, taking baby steps as it tries to evaluate where the world and India stand. Short term real interest rates are negative, with inflation at 10% and one year deposit rates around 6%.

Coming to the second point - the fiscal deficit. One of the lessons from the Great Recession has been that governments should learn to run a proactive countercyclical fiscal policy. Essentially they should act like the proverbial ants in the ants and the grasshopper story. When the country is growing well, the government should minimize spending and borrow less, thereby keeping some cushion for it to act with force in times of crisis. In times of a recession, the government can borrow more and spend more, keeping the economy going.

The current government had an excellent opportunity to do that. With the money coming in from the 3G auctions and PSU disinvestments, plus overall robust tax collections, they could have cut down on the huge debt to GDP ratio (which is actually amongst the worst in the world) and built up a war chest to help the nation in times of strife. During the recession, they increased the fiscal deficit to support the economy, which was necessary. Unfortunately they are not reducing the fiscal deficit now. They continue to succumb to populist measures and increase spending and subsidies. I remember Mr Willem Buiter, Citigroup's Chief Economist, mentioning in a talk: The Indian government subsidizes its borrowings by various means such as the SLR (Statutory Liquidity Ratio) requirement on banks, which ensures that there is a forced market ready to buy government bonds.

If one looks at the implications of the inflationary scenario and the tepid fiscal outlook, there is a case for saying that India's interest rates currently are much lower than what they should be. Things are unlikely to continue as they are for an extended period. Something's going to give.

The third point is India's current account deficit. India has historically had a current account deficit post Independence (somewhat paradoxical for a nation that in the past few thousand years was one of the lynchpins of global trade). The Indian economy was highly insular. As mentioned by Paul Krugman, India had a philosophy of trying to meet all its requirements internally, even if it was at a tremendous cost disadvantage, where free trade would have made sense. It is only in the past 10 years or so that software exports and capital flows have provided some semblance to the deficit. India is still forced to import much of its oil requirements and capital goods. Currently, India is able to just about finance the current account deficit (i.e. meet its foreign exchange requirements) through the capital account. Woe betide us if the world economy goes into a crisis mode again, for all the capital that we are enjoying right now will fly away in no time. The only positive, in a perverted manner of speaking, will be that our own growth will also suffer, bringing down the oil and capital goods imports and easing pressure on the balance of payments.

So yes, I am positive on the Indian economy. But I can't put blinkers over my eyes and declare that there is nothing rotten in the state of Denmark. Its probably the time to be calfish, not bullish.

Sunday, August 15, 2010

The divergences continue to widen. The bottom 90% struggles to have an existence, while the top 10% is bored of it.

With more modes of communication and information exchange, there is actually less tolerance and greater expression of intolerance. How did we end up here? Weren't we always the most the pluralistic, tolerant and accommodative society? Or was it just a pipe dream?

What gives people the right to use violence and intimidation in enforcing their moral codes on others? How dare they do it? Why does the state machinery fail to tackle them?

How can a person deny me my right to earn to a livelihood in any part of the country? How can he tell me to go back if I don't speak a particular language?

Communalists hold people hostage at will. A person who once burned the Constitution had the cheek to say that the new rupee symbol is not representative of his state because it incorporates Devanagari. Actually, till I met some people from his state, I always thought language was a means of inclusion. Post that, I realised it could be a means of exclusion as well.

We see disaster looming in the Commonwealth Games, and give ourselves an indulgent pat on the back, taking pride in the fact that we knew all along something would go wrong. Had we really been concerned, the top official would have been publicly lynched by now.

Kashmir burns. How long are we going to drag things? Are body counts subservient to national pride? Why can we not swallow our ego and accept our ineptitude in resolving the conflict? Why can't we just let go? And to our displaced Kashmiri brethren who pine for their homeland, why can we not promise a better life in the rest of India?

I have been hearing the same recyled stuff for so many years that I have lost count.

Saturday, July 24, 2010

K Q Nacht, a leading investment bank, downgraded its assessment of the US economy from "Might Be Screwed" to "Really Screwed" with a "Does It Matter" outlook.

Global Strategy Head of K Q Nacht, Mr Jonathan Iamdone emphasized the change in the tone of the Fed Chairman in his recent testimony to the House Banging Services Committee.

"The Chairman used the term 'unusually uncertain' in describing the economic outlook, while the market consensus was for 'certainly unusual'. K Q Nacht uses a proprietary semantic parser that constructs the Policymaker Verbal Surprise Index, which shows that this phrase introduced a downward bias of 0.031% in our projections. We are accordingly downgrading our assessment of the US economy"

In other news, the messiah of funda-mental investors, Mr Darren La Carte, has reiterated that he continues to be bullish on equities. "Augmented US unemployment at 16% is very bullish for equities, as companies will have no business to conduct and will sit on a pile of cash which will be shown as perpetual net profit every year"

The Darren La Carte of India, Mr Mahesh Rattlewala, echoes similar sentiments. "I think India is decoupled from the rest of the world. Banks are able raise foreign money at 500 bps over LIBOR. Of course, they may not be able to lend to anyone at those rates, but atleast they are able to raise."

Petrified Bank of India Governor, E Shaamkolao reiterated that Indian food price inflation would come down and hence there was no need for monetary tightening. "Potatoes, from current prices of Rs 105 / kg, will start costing Rs 110 / kg - a clear reduction in food price inflation from 10% to 5%. Of course, people not being able to buy at these prices at all, is a separate trivial issue. Inflation would have come down and hence we must keep interest rates low."

Separately, the Committee of European Banging Supermisers published the results of its stress tests late yesterday night. The summary states "We do not foresee any double dip, except in chocolate..."

Saturday, July 17, 2010

Day 3:
I shiver with the bitter cold. M offers me some dry fruits. "Eat this" he says. "The mountains are treacherous. Many a brave man has lost his soul fighting the harsh winds"

Day 6:

"You will dress up like them. Jeans, t-shirts, sports shoes. Nothing out of the ordinary. Is that understood?" N interrupts "Sir, can we get to see Deepika Padukone once?" M breaks into a crooked smile. "You will see her eventually anyway..."

Day 8:

"Q got killed. Someone blew his cover. The police didn't think he had any important information. So they made it look like an encounter.We need to be careful. Don't go about wandering too much" For the first time, M looks afraid.

Day 11:

"Is everyone clear? P enters through the north overbridge. S will be on platform 2. K will be standing at the entrance with the bag. Once the fast train reaches at 8:56 AM, K will enter" M looks at me "K, you will need to be really careful with the bag. It should not shake too much before time."

Day 12:

"Look at that couple in the corner there. How shamelessly they are at it." P looks at me with a grin. The breeze on the pomenade is soothing. "No girl would have ever fallen for you" I tease him. "You never know" P says "There is still some time left"

Day 13:

The pigeons flutter about the beautiful building. Sunlight streams in through the windows. Slowly, the empty platforms start filling. With people. The people who are always in a hurry to get somewhere. The people who think it all really matters. The people who don't realise it's ultimately the dark alley in which all our paths must meet.

Monday, June 21, 2010

Travelling around Mumbai has its advantages. If one is observant enough, some walls are adorned with posters from the latest...errr...mass entertainment motion pictures. I was just wondering what the results would be like if we had similar titles for the horrors encountered everyday in financial markets. A sample:

Sunday, June 13, 2010

Chhotu hurried up, eager to reach home quickly. Under the weight of his school bag, walking fast was difficult. But he kept moving. Today could be a special day.

His mother was standing at the entrance, as usual. The sound of her child's feet was music to her ears.
The boy, in his eagerness, rushed past and headed straight to his mattress. His hands quivering with excitement, he lifted the torn pillow and took out the small box beneath it.

Inside it were some coins. Carefully he started counting. Then he took out another coin from his pocket and added it to the small pile. "10 rupees, 75 paise" he said. His face fell. Still another rupee and a quarter short.

He looked at his mother, who was smiling with a mixture of amusement and understanding. Answering his look , she said "It's ok. You will save enough soon. Come now, I have made hot onion poha. He should be coming anytime now. You can listen to him while eating."

Sure enough, almost as if on cue, it started. Chhotu ran up to the only window in the room and stood on his toes, struggling to see.

The flute man was on time again. He was walking along the road, playing as usual. A mellifluous melody reverberated through the air. It produced a feeling of peace and tranquility in Chhotu, such as he seldom experienced. A feeling that would transfer him to another world, a world which was pristine, unblemished, a world so pure as could never be imagined.

He had seen and heard the flute man many a times on different days. A thin, ragged figure, with his trademark stained kurta and a white cap. He carried a pole from which hung flutes of different sizes and colours, some more attractively decorated than the others, some long, some short, but all capable of producing rapturous sounds.

Chhotu had his heart set on buying one of those flutes. He already knew which one wanted to buy. It was painted silver in colour, with a golden thread hanging from one of its ends. Getting one was his dream. He sadly looked at the coins still clenched protectively in his fist. One day, he would have enough.

It had never ceased to amaze Chhotu as to how many different tunes the flute man could produce. Most people would usually play film songs or folk songs. His tunes were entirely original. At times, enthusiastic and cheerful. At times, sad and melancholy. Clearly, they reflected the thoughts which possessed him. Nevertheless, the flute man would always play, oblivious to the reactions of the people walking on the street.

One day when Chhotu helped out his neighbouring vegetable vendor in carrying some vegetables, the old man gave him some money in gratitude. His heart thumping with joy, Chhotu realised he finally had enough money to buy a flute.

He sat anxiously, waiting for the flute man to turn up. Soon, one of those magical instruments would be his.

He waited the entire evening. In his restlessness, he couldn't even eat properly. But the flute man didn't turn up. Disappointed, he went to sleep.
In the morning, he heard people talking outside.

"Poor fellow, was so young. Always played so nicely"
"It's a wicked world. Who can stand before His will?"

His mother was sitting just outside with a sad look upon her face. As she saw Chhotu coming she beckoned to him to sit on her lap.

Ruffling his hair reassuringly, she said "You know, that flute man who used to come everyday...They say there was an accident last night...A truck hit him...The driver lost control...He was blowing the horn as a warning but the flute man didn't realise...He was deaf you see..."

Chhotu looked at his mother with a frozen expression, bereft of any reaction. He went back inside without a word and stood on tiptoe at the window. There were no melodies. There was only the sound of silence.

Well, whats so great, you ask? Just pick a word from each column, and there you have it folks - your very own Financial Headline Generator! It actually works! Try it!

Example 1: US Stocks Fall On Consumption Fears

Example 2: European Banks Rally On China Demand Growth

As you may realise, a leading news and data provider website is a leading proponent of this approach...No prizes for guessing which one!

Its a fairly comprehensive approach too and works well even when one doesn't have a clue about financial markets! Just take a region, a market, a movement verb, and a cause. Repeat ad infinitum!

Sometimes, the zeal with which news providers seach for causes in trying to explain market movements, is simply exasperating. Much of the time, market movements may not have a particular driving reason - it just happens that a combination of bids and offers makes markets move that way!

But the human mind seeks explanations, preferring a simplified single dominant cause for the observed behaviour, rather than realising that thousands of exiguous threads of action and reaction came together to produce that behaviour.

Wednesday, April 14, 2010

An office discussion on the availability of tickets for the IPL final (which are already sold out) started this particular train of thought.

There is a concept known as price discrimination in economics. Roughly it means that people end up buying identical goods or services at different prices from the same provider, which may happen due to a variety of reasons.

We witness price discrimination in various forms and various markets. Different consumers attach different values to the same or similar products or services. Thus, different people are willing to pay different prices for a product / service which costs the same. Thus, if a seller wishes to maximise her profits, she should sell the product / service to each customer at the price which the customer wants to pay. However, in a perfect market, this will not happen and the goods or services get transacted at the market clearing price (where supply meets demand). The difference between what the consumer is willing to pay and what she ends up paying (if its less) is called consumer surplus.

However, under certain conditions, sellers may be able to practice price discrimination i.e. charging different prices for exactly the same product / service. Usually such price discrimination can arises and be sustained much more easily in a market with one / few players where the goods or services are non-transferable and non-replicable. It arises much more frequently in services rather than goods markets because services are far likelier to be non-transferable and non-replicable.

The best everyday example of such price discrimination is air tickets. An air ticket represents the right to travel from one place to another on a particular date and at a particular time. It meets all the requirements stated above:

1) The experience and process of travelling from a particular place to another on a particular time and date is non-replicable

2) Once the ticket is bought in someone's name and assuming suitable measures are in place to prevent someone else from travelling using that ticket, it becomes non-transferable

3) The number of players is few

4) Information about pricing from the cost side is relatively restricted. You don't know what the airline is looking at when it's setting the price for its tickets. Hence you cannot really negotiate with it. You only know how much the journey is worth to you and hence how much (upto a certain maximum) you would be willing to pay for it.

5) The value attached by different people for the same journey will be different.

I have been wondering whether there was a case for the IPL organisers to do something similar with the pricing for IPL tickets.

The current pricing incorporates some amount of price discrimination, which is common to almost any live performance anywhere i.e. differential pricing based on the seating arrangements. So you will have your common stands (by which I mean those contiguous blocks of concrete), stands with chairs, executive lounges, closed AC boxes, pavilion stands etc

Note that here the difference in prices usually does not correspond to the difference in costs. In certain categories e.g. stands with chairs and common stands, there may not be any difference in the running costs at all. Still the prices will be substantially different.

Going a step further, perhaps the IPL guys could have employed price discrimination by keeping the price within a particular category variable. A simple numerical example may make it clearer:

Let us say they have 10,000 seats to offer. Right now they have priced each ticket at Rs 1000. Assuming the match had a full house, they earned 10,000 * 1000. Note that here each of those 10,000 people who bought tickets was willing to pay a minimum of Rs 1000 to watch the match.

Now lets say they introduce a jump of Rs 100 in the price for every 10% of tickets booked.So the first 1000 tickets get sold at Rs 1000The next 1000 at 1100The next 1000 at 1200

And so on. They will then earn an average of 1450 per ticket sold i.e. 1450 * 10,000

Of course, this is an oversimplification. The pricing algorithm will need to be much more robust. But the basic point remains that it could have been employed.

The most important requirement here is that there should be a sufficient number of buyers at the highest prices also. So it may end up as a tapering structure with less buyers at every price level as it goes higher.

They would have had to work really hard to ensure that they get the demand curve right.

Further, in case of matches with high demand, they would have pocketed the profits which black marketeers would otherwise earn! Funnily enough, when demand is sufficiently skewed, black marketeers ensure higher economic efficiency by pocketing the consumer surplus, which would otherwise be lost!

Lots of caveats / restrictions / difficulties in this:

1) Numbers. An average plan carries 200 odd passengers. Here the number of people for each match is in thousands. However at the end of the day, its only computers doing the job so shouldn't really matter. And even in case of airlines with 30-40 flights a day, each such airlines is doing this for 6000-8000 seats daily and around 2 lakh monthly! So it may not be that bad really.

2) Regulatory restrictions - I am frankly not aware whether there are any laws or restrictions which prevent this.

3) Basic consumer perceptions - Discriminatory pricing is accepted by the public in airline tickets. I am not sure how they would perceive it for cricket matches.

4) Non-transferability - This is arguably the most important point. If the tickets are transferable then arbitrage is possible. Lets say I buy a ticket at 1000. Now the IPL website is selling tickets at 1100. If the tickets are transferable, I can sell it to someone else at 1099 and he would still buy it from me. However eventually, with enough genuine demand (i.e. people want to see the matches and hence do not sell tickets to make profits) and the right pricing, such resale may eventually get over and the fresh set of people would then need to buy from the IPL website itself.

They could have at least experimented with price discrimination in a smaller way.

A simple way to do this, in my opinion, would have been to do a Tatkal kinda thing - opening bookings for a limited number of seats say one day before the match. Price discrimination would be more acceptable and easier to implement in such a situation.

The last part of this saga is that on Friday, Fitch downgraded Greece to a BBB- rating from a BBB+ (which is the last investment grade rating) with a negative outlook.

Its been an interesting experience for people like me, for whom "BB" till a few years back referred to an obscure soap brand whose ads were broadcast on All India Radio.

Within the daily ups and downs of the financial markets, the Euro Zone stands out as a very absorbing and challenging case study in itself. A union which would have seemed almost impossible at one point of time, hailed for giving the first real competitor to the US dollar, bringing prosperity to Europe and boosting European & World trade. Or did it really? Did it instead end up fuelling a vicious cycle of excessive leverage (debt) in the southern peripheral economies which lost no time in using the drastically reduced borrowing costs to their advantage in building an unsustainable growth cycle of consumption and housing booms?

Unfortunately, one thing I have learnt in this field is that skeletons may be shoved into cupboards, but they have an unfortunate propensity to smell and tumble out with alarming alacrity, sooner or later. Greece is no exception.

This tiny nation of a few million people has become the focal point and unwilling poster boy for the excesses of a system which was in all probability not the wisest of choices in the first place. Of course, its much easier to be wiser after the event has occurred.

As he wrote: "The euro was a unique and unusual construction whose viability is now being tested. The construction is patently flawed. A fully fledged currency requires both a central bank and a Treasury. The Treasury need not be used to tax citizens on an everyday basis but it needs to be available in times of crisis. When the financial system is in danger of collapsing, the central bank can provide liquidity, but only a Treasury can deal with problems of solvency."

Or as Joaquim Voth of the Barcelona GSE has written on his blog: "If history teaches you something, it's that countries will stick to a silly monetary standard for way too long, especially if it's seen as the ultimately proof of adulthood in terms of currency."

An obvious thing, but as someone has mentioned earlier, the world is full of obvious things which no one by any chance observes. The discussion on this can go on and on.

So, quo vadis, Euro? Remains to be seen, though the answer seems to be down for the time being.

Sunday, April 11, 2010

A chat with a friend who is (somewhat dispassionately) preparing for his Level 3 CFA examination prompted this question in my mind.

A few lines from Wikipedia on the CFA designation: Chartered Financial Analyst (CFA) is an international professional designation offered by the American CFA Institute (formerly known as AIMR) to financial analysts who complete a series of three examinations. To become a CFA Charterholder candidates must pass each of three six-hour exams, possess a bachelor's degree (or equivalent, as assessed by CFA institute) and have 48 months of work experience in an investment decision-making position. CFA charterholders are also obligated to adhere to a strict Code of Ethics and Standards governing their professional conduct

Having seen many friends prepare for the examinations (and my own half-hearted attempt) I know for sure that the course coverage and subsequent examinations are tough and rigorous. This is the oldest designation of its kind and is well-respected. (The Wikipedia CFA link also has a list of the recognitions that this designation possesses)

However, having worked for two years now in a "finance" role, I am not sure of how much of a value add the CFA is. The reason is that it is simply not intended for everybody who wishes to be associated with a finance role. And there lies the tragedy, in India at least. We tend to have a penchant for degrees and qualifications. Any qualification seen as sufficiently prestigious is coveted (in fact, one reason for the mushrooming of MBAs, but more on that some other time)

There is no doubt that the CFA is A solid qualification. But whether it is THE solid qualification one needs is something that has to be carefully evaluated.

A mere glance at the Body of Knowledge tells us how focused a course this is:http://www.cfainstitute.org/cfaprog/courseofstudy/topic.html

Another look at the exam area topic weights shows a marked progression from breadth across areas of finance to depth in studying asset classes and portfolio management: http://www.cfainstitute.org/cfaprog/courseofstudy/topicareaweights.html

It is totally intended for people who are looking for careers in investment research / management / banking & advisory. This is a very specific area of finance. Finance as a field is much broader. Consider:

Would CFA make a difference for people who are working in the above sectors? My sense is - not much unless they want to shift to the field of investments. Of course, one can argue at the end of the day that one will learn something BUT theres a huge cost - the programme requires intensive preparation and is not easy. Will they be able to reap benefits which justify those costs? Probably not. And yet, directly or indirectly, I hear of plenty of people preparing for it without having a clear idea of where it will take them.

In fact, I have often felt that the number of people who want to take the exams is actually higher. The 3 year period and the 4 years of work experience actually acts as a deterrent.

For the CFA institute, here lies a really good opportunity. If they can correctly gauge the latent demand in India and elsewhere for a good general finance degree which has international recognition and brand value, I am sure it will blow them away! What they can do is to offer the first two levels of the CFA charter as separate designations in their own right. This will ensure that the "CFA" designation brand doesn't get dilutedand at the same time there is enough of a delineation to satisfy the needs of all market segments.

By splitting the designations into a hierarchy, the CFA Institute will end up doing somewhat of a differentiation in segmentation rather than a one-size fits all approach. (I am sure there's a marketing term for what I am saying - can one of the marketing studs out there help me out?)There are examples of this in other fields. The one that comes to mind right now is the Cisco series of certifications in the field of computer networks. Those interested can check out: http://www.cisco.com/web/learning/le3/learning_career_certifications_and_learning_paths_home.html

Of course, such complexity may not be needed in case of the CFA.

One possible scheme of things could be:

The Chartered Financial Manager designation for people who have say 1-2 years of work experience and clear the CFA Level 1 examination. It would be targeted at and useful for all those looking at a designation which gives them a broad introduction to the field of Finance. This could actually act as a good competitor to the MBA (Finance) degree since it would be faster and hold its own in terms of brand value. It will be a good option for people looking for a more focused entry into financial management, as opposed to management in general.

The Chartered Financial Market Analyst designation for people who clear CFA Levels 1 & 2 and have say 2-3 years of work experience. It would be useful for all those looking at a designation connected with Financial Markets.

And finally, the CFA designation.

Done this way, more and more people will have an incentive to take up the CFA since they have an incentive as the effort and preparation for one examination is not wasted - they get some bang for the buck in the form of a separate recognition. No doubt one may argue that the difference is largely psychological - at the end of the day, a person can always mention in his / her CV that he / she cleared CFA Level 1. However, if you place yourself in the shoes of a prospective CFA candidate, this mere difference in terminology could prove to be a clever marketing tool which changes the perceptions of people about the programme drastically. The CFA institute will be able to attract a much wider base of candidates.

Sunday, February 28, 2010

"I will have a strawberry margharita", Mitul said. Viral looked at him quizically, as if to make sure he had heard it right. Mitul leaned back on the sofa, the faintest hint of a smile on his face. His eyes had that dreamy look once again, after many years.

He reflected on the days that had passed by. The days of his first foreign trip, to a beautiful place named Hong Kong. He had fallen in love with it - the sights, the sounds the smells; The crowded night bazaars, the skyscrapers, the magnificent views of the harbour, the walks along the steep bylanes, even the double-decker buses. It had the essential character which defined any great city - the protection of one's individuality without the need for its assertion. Everyone was someone. Free to carve out his own little world.

"I honestly don't remember the last time you had a drink. I thought you don't drink.You never liked the idea of losing control over yourself, did you?" Viral said, some lines of discomfort still visible on his forehead.

"A fair point. But the need for control is an outcome of fear. Fear of where the lack of control will take us. But when there is no fear, there is no need for control." Mitul smiled again as he spoke those words.

"Yeah yeah, I know its your last night in Hong Kong." Viral followed his gaze and couldn't help breaking into a smile himself. "You know what? I think she's pretty too" he whispered, with a wink.

Pretty was not the word, Mitul thought. There was a powerful connect beyond mere physical appearance. As she went about the restaurant, serving people, taking orders, cleaning tables, he could feel the pride she was taking in her work. It commanded his respect. Her serene face had a glow which was made more radiant by the candles in and around. Now and then, an insolent tuft of hair would brush against her cheeks, only to be resolutely pushed back.

"Its the traditional greeting for the Chinese New Year. I had told you, remember?" Viral snapped.

"Its really cold tonight, isn't it?" Viral asked Mitul. They were walking back from the restaurant to the hotel where Mitul was staying. Mitul continued to walk silently. He didn't respond.

"Dude, you seem to have really fallen for her. Or was it the margharita?" Viral persisted.

Mitul looked at him. "We alway thrive on possibility, don't we? We always seek to change, to modify, to extend the possibilities that life presents. Why do we not accept the possibility as an end in itself? That the possibility existed only for the sake of being a possibility - not for materializing into an end result?"